# Liberty BUSI 352 Final Exam Answers Complete Solutions

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Question 1 Based on the CAPM, what return should Jordan expect from a security that last year returned 9% with a standard deviation of 12%, a beta of 1.2, when the overall market return has been 10.2%, and the risk free rate of return is 3%?

Question 2 The supply of coffee has been drastically reduced due to drought resulting in substantially higher prices. Which of the following statements is/are correct? 1: The demand curve for coffee will shift to the right. 2: The demand curve for creamer will shift to the left. 3: The demand for orange juice will increase.

Question 3 Reed just found out that his dad, Red, has terminal cancer. Terminal illness can be devastating for a family. The financial planner working with Red will likely have to deal with which of the following? 1: Estate documents 2: Beneficiary designation forms 3: Emotional issues

Question 15 Which of the following best describes the investment characteristics of a highquality longterm municipal bond?

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Question 21 XYZ has a current market price of $30 per share with earnings last year of $2.50 per share, a beta of 1.1 and a dividend of $1.25. Using the price/earnings multiplier, what price do you expect the stock to trade at if earnings per share next year are $3?

Question 32 Ashley began saving $5,000 per year from age 25 to age 35 (ten years) and then invested the funds for another 30 years. Teeto began saving at age 35 and saved $5,000 each year until he retired at age 65 (30 years). Which of the following statements is correct assuming they invested their funds at 8 percent?

Question 40 Betty wants to know what the probability is that her investment in HighFlier, Inc. will generate a return less than zero. The investment has a mean return of 6% and a standard deviation of 3%. Based on a normal distribution curve you correctly inform her that:

Question 57 Your client, Alex, has only two assets in his portfolio: assets A and B. Asset A had a standard deviation of 40%, and Asset B has a standard deviation of 20%. 50% of his portfolio is invested in Asset A, and 50% is invested in Asset B. The correlation for assets A and B is 0.90. What is the standard deviation of Alex’s portfolio?

Question 59 Which of the following persons, if any, is (are) not a party to a trust? 1: Trustee 2: Beneficiary

Question 70 Which of the following are advantages to being a shareholder? 1: The expected returns for equities are higher than debt securities. 2: Equities have prices listed on major exchanges and are marketable. 3: Equities typically earn their expected return. 4: Equities that do not pay a dividend are tax efficient.

Question 71 DWI has just paid an annual dividend of $2 per share, which is expected to grow at 5% indefinitely. If your client’s required rate of return to meet her retirement goals is 12%, what is the intrinsic value of the stock using the constant growth dividend discount model?

Question 75 Which of the following convictions, if any, will always bar a candidate from becoming a CFP? 1: Conviction for tax fraud 2: Conviction for passing a bad check